Yahoo Finance Is Now The Time To Put GrainCorp (ASX:GNC) On Your Watchlist?
For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in GrainCorp (ASX:GNC). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
View our latest analysis for GrainCorp
GrainCorp's Improving Profits
GrainCorp has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. Impressively, GrainCorp's EPS catapulted from AU$0.61 to AU$1.70, over the last year. It's not often a company can achieve year-on-year growth of 179%. The best case scenario? That the business has hit a true inflection point.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. The good news is that GrainCorp is growing revenues, and EBIT margins improved by 6.2 percentage points to 12%, over the last year. That's great to see, on both counts.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for GrainCorp's future EPS 100% free.
Are GrainCorp Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Not only did GrainCorp insiders refrain from selling stock during the year, but they also spent AU$159k buying it. This is a good look for the company as it paints an optimistic picture for the future. We also note that it was the Independent Non-Executive Director, Clive M. Stiff, who made the biggest single acquisition, paying AU$84k for shares at about AU$8.43 each.
Should You Add GrainCorp To Your Watchlist?
GrainCorp's earnings per share growth have been climbing higher at an appreciable rate. Growth investors should find it difficult to look past that strong EPS move. And in fact, it could well signal a fundamental shift in the business economics. If that's the case, you may regret neglecting to put GrainCorp on your watchlist. We should say that we've discovered 2 warning signs for GrainCorp (1 shouldn't be ignored!) that you should be aware of before investing here.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of GrainCorp, you'll probably love this free list of growing companies that insiders are buying.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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